Every morning between 8 and 9 a.m., commuters in Chinese cities get out of the subway, pull out their phones, scan a QR code and rent a bicycle to travel the few hundred meters between the station and their offices. During rush hour, there are between dozens and hundreds of bikes crammed along the sidewalks outside most major transit centers. To meet the demand of cyclists, bicycle rental companies maintain fleets of trucks to transfer bikes from across town to metro stations, sometimes several times a day.

These bike rental companies still live in the shadow of the “bike wars”: a protracted venture capitalized struggle between Ofo and Mobike that took place from 2016 to 2017. Both companies wanted to be “Uber for the bicycle sharing ”; together, they’ve spent hundreds of millions competing to see who could build the biggest fleet of bikes and collect the most user deposits. For consumers, this had its advantages: competition kept fares artificially low, with frequent discounts and many bikes scattered around cities. For officials, bicycles were a management nightmare, obstructing sidewalks and inconveniencing pedestrians.

In August 2017, China’s Ministry of Transportation and ten other departments jointly issued new rules requiring city officials and businesses to regulate bicycle parking, standardize services, and ensure the safety of users’ depots. The bicycle rental industry suffered a sudden contraction, with tens of millions of bikes pulled from city streets. In the end, both companies lost, leaving behind debts and vast bicycle graveyards.

The missteps of Ofo and Mobike, as serious as they are, have not killed the bicycle rental industry in China. On the contrary, following the bicycle wars, the industry seems more and more stable, with companies like Qingju, Meituan and Hello carving out a niche in the market. According to a 2020 report released by data agency EqualOcean, these three companies have entered 400 cities combined and have tens of millions of monthly active users.

With far fewer bikes allowed on city sidewalks – and far less competition from the little players who didn’t survive the crash – fleet management has become a game of chess. The more vehicles a company maintains, the higher its operating costs will be and the more it will be monitored by regulators. However, not deploying enough bikes will result in low exposure and risk alienating users who are unable to find a ride when they need to.

This has forced companies to refine their techniques for managing and distributing vehicles. Part of the puzzle is getting users to properly park their bikes after a trip. Bicycle rental companies have developed many technical solutions to this problem, including using geolocation technology to draw lines around designated parking areas in the app. Users can confirm whether they have parked in an authorized area after their journey. If they do not, they may be charged additional fees; repeat offenders may lose their eligibility for reduced monthly or annual subscriptions. Some cities have even installed Bluetooth markers in designated parking areas to detect whether a bicycle has been properly parked. If a bike is outside the range of the Bluetooth module, it will not lock and riders will continue to charge.

Of course, if regulatory compliance is important, the real concern of bicycle rental companies remains to ensure profitability.

Let’s do the math. Today, most Chinese bicycle rental services cost 1.5 yuan ($ 0.24) for 15 minutes, with subscriptions providing a cheaper alternative for frequent cyclists. At Hello, the bikes cost 0.3 yuan per day to maintain, with an additional depreciation of 0.6 yuan per day. In theory, as long as each bike is used once a day, the business makes a profit, and in most of the cities where Hello operates, the average bike use rate is more than three times that.

Yet these are slim margins and they don’t take into account other operating costs, such as research and development or marketing. But Chinese bicycle rental companies believe they have a solution: shared electric bicycles. Electric bicycle rentals are more expensive than regular bicycle rentals, running between two and four yuan per 30 minutes. They also allow users to travel longer distances: Rental bikes are typically used to travel distances of less than three kilometers, but e-bikes can easily travel up to eight kilometers.

Urban leaders, who have not forgotten the chaos of the bike wars, are lukewarm about the potential of electric bikes. In addition to the usual road safety concerns, city leaders are concerned about the impact e-bikes will have on already-cash-strapped public transport and taxi networks. Rented bikes were good for taking commuters the last few hundred yards from their bus or metro station to work, but the ubiquitous e-bikes could make the transit part of the trip totally obsolete.

Beijing, Shanghai and Guangzhou have already made it clear that they are not interested in e-bike rental services, although many small towns have yet to take a clear stance. Another important question is how companies will charge for e-bikes. At first, operating companies would take vehicles back to suburban warehouses for recharging, then put them back on the road, or send dispatchers to replace batteries. Neither option is particularly cost effective.

There is another option. Rather than hope to achieve profitability through bicycle rental alone, companies could use bicycle rental as a high-frequency, high-quality, low-unit-price traffic portal to channel and strengthen their higher-margin businesses. . For example, Meituan’s app already allows users to seamlessly switch between the company’s bike-sharing service and its other activities, including take-out and hotel reservations. Rideshare service Didi, which operates Qingju, sees bicycles as a way to reach consumers in small towns, increase user volume, and boost app engagement. Hello is also set to integrate lifestyle services, including travel, into its app.

This represents a key difference between Chinese internet companies and their counterparts in Silicon Valley: Chinese companies, down to the simplest bicycle rental company, all dream of becoming indispensable and versatile platforms essential to the daily lives of users. .

Translator: Matt Turner; editors: Wu Haiyun and Kilian O’Donnell; portrait painter: Wang Zhenhao.

(Header image: A woman pushes a shared bicycle in Kunming, Yunnan province, June 20, 2020. People Visual)